UPDATE by Brian: I’ve attached a  summary of the Budget Committee’s bill over the flip.  

The plot thickens.  The Governor today threatened to veto the work of the bipartisan Budget Conference Committee and reject any bill that, essentially, doesn’t hew to his desire to destroy the social safety net of the state.  The Democratic leadership countered that they’ll pass the bill anyway.

Democratic legislative leaders vowed today that the Legislature will pass a “share the pain” budget-balancing plan early next week – with or without tax increases — that will close the state’s spending deficit without completely shredding California’s social services safety net.

The vows by Senate President Darrell Steinberg, D-Sacramento, and Assembly Speaker Karen Bass, D-Los Angeles, came about an hour after Gov. Arnold Schwarzenegger said he wouldn’t sign a plan that was balanced with tax increases.

The rhetorical staking out of ground by the key figures in the current version of the state’s ongoing fiscal melodrama came a day after the Legislature’s joint budget conference committee, on a party-line vote, adopted a plan that included about $2 billion in new oil production and cigarette taxes to help bridge a $24 billion budget gap.

Let’s take a brief look at what else the conference committee has done.  They resisted some of the worst health care cuts, including the total elimination of Healthy Families (the SCHIP program).  They reduced education spending significantly in both K-12 and higher ed.  They reduced corrections spending by a fairly large amount.  Despite the fact that state parks pay for themselves, Democrats agreed to cut state participation in park funding, replacing it with additional fees on park admissions.  They agreed to increasing withholding by 10%, which amounts to an interest-free loans from citizens to the state.  According to Karen Bass, they agreed to 45% of the Governor’s proposals in full, and 93% in part.

So the idea that Democrats are not cutting spending is simply unreasonable and wrong.  At the same time, they rejected additional cuts to state worker salaries.  They rejected the end of Cal Works or Cal Grants or In-Home Support Services.  And some of the Governor’s proposals, like borrowing from local governments, were rejected unanimously.

I don’t even much like what the Democrats came up with.  But they did not agree to completely wipe out the social safety net, calling for moderate increases in revenue on constituencies who have been getting away with murder, pretty much literally, for decades, to pay for the externalities in health care costs that they impose on the public.  As Noreen Evans explains:

Californians expect their schools to be good, a safety net to be available to the needy, a college education to be affordable for working families, their air and water to be clean, and their parks to be open and kept up. In order to meet their expectations, we must to pursue new revenues. Today, for the greater good, we approved two new tax proposals that won’t impact most Californians.

Establishing a 9.9 percent tax on oil extracted from California would generate $830 million in FY 2009-2010 and $1.1 billion in future years. This precise proposal was part of the governor’s budget proposals last year. Increasing the excise tax on cigarettes by $1.50 per pack generates $1 billion in FY 2009-2010.

Tax increases require a 2/3 vote. Absent the pursuit of new revenues, wider and deeper cuts will be required. Getting new revenues requires a mere 6 Republican votes: 2 in the Senate and 4 in the Assembly. It is undemocratic that the votes of 6 Republicans can veto the votes of 75 Democrats.

But Arnold wants to destroy the state of California like a good little neo-Hooverist, so he said no.

The Dem leadership appears to want to have this fight for the moment, so they ought to realize one thing: Arnold will ultimately be responsible – and reviled – in a government shutdown situation.  No question about it.  Not 1 in 10 Californians can even NAME a Democrat in the legislature.  If the ship sinks, Arnold will be perceived as the skipper.  And so, if and when Arnold vetoes the bill, the Democrats should send it back – with MORE tax fairness solutions, daring Arnold to prolong the agony.  That resets the battle and draws clear lines between those who want the richest companies in America to sacrifice along with ordinary Californians, and those who want to protect the rich completely.  Unfortunately, the Dems are tipping their hand that this will not be the case.

But Bass and Steinberg seemed to be reconciled to the likelihood that the tax hike proposals would fail next week. Steinberg said that if they did, the package they sent the governor would have a reserve $2 billion smaller than he had sought.

We have a couple days to change this dynamic.  The progressive movement around the budget has stiffened spines a bit so far.  Time to make the calls and emails.

This is funny:

Schwarzenegger added that he wants a budget plan that will bridge the entire projected deficit of $24 billion, not a stopgap measure to “kick the can down the alley.”

The plan must consist of permanent solutions to the state’s fiscal problems, not one-time revenue that sparks ongoing spending commitments, Schwarzenegger said.

When Schwarzenegger was reminded that his own budget plan contains some one-time revenue proposals, such as acceleration of income tax payments, he smiled.

“Very good point,” he said. “We don’t want to add to the problem.”

The cyborg is not running on all cylinders.  He has a single-minded purpose to kill the California dream and even these extremely moderate revenue enhancements.

June 16 2009 Conference Report – Get more Business Documents  

I’ve been hearing the California crisis, and the Governor’s response, referred to as a kind of shock doctrine, used to transform the state’s social safety net and radically alter the lives of the poor and downtrodden.  And that’s entirely true.  But not necessarily through the budget cuts, which have met fierce opposition from Democrats and the nascent activist progressive movement.  No, the real shock doctrine is happening behind the curtain, with a proposal engineered with bipartisan support, that will really permanently turn the state into an experiment in Chicago Boys free-market fundamentalism, not unlike the conservative “paradises” created in developing nations, all of which are crashing, by the way.

Last year, the Governor and legislative leaders put together the Parsky Commission, a classic blue-ribbon panel led by Gerald Parsky, a right-wing investment fund manager and professional hack who has consistently been put to use by Republicans in Sacramento and Washington to carry out their radical plans.  He was George Bush’s California campaign chair in 2000 and 2004.  The idea behind this one started from a decent premise – California has a taxation problem, and needs a study group to look into how to reform it so that it’s better equipped to handle boom-and-bust economic cycles.  Supposedly, all ideas – including Prop. 13 – would be “on the table” from this commission, which would seek a more stable solution.

Of course, the fix was in from the start.  Because this panel respected the 2/3 requirement for raising taxes, it sought revenue-neutral solutions, tinkering and shifting the tax burdens rather than reforming them.  So predictably, the end result is a proposal that broadens the tax base while shifting the burden downward onto the lower and middle classes while relieving the wealthy.  The Governor’s Chief of Staff tipped her hand about this previously when she said that the problem with California’s tax structure is that it’s too progressive.

Some of the Commission’s proposals, like broadening the sales tax to include services in addition to goods while lowering the rate overall, make a bit of sense.  But the rest of it is pure right-wing fantasy:

At the 14-member commission’s penultimate meeting in Los Angeles June 16, its members appeared to narrow its potential recommendations, due July 31, to two proposals.

Both would lower the top income tax levels and, in one case, eliminate the state’s corporate tax and the portion of the sales tax pocketed by the state.

Under one proposal, what the commission refers to as Tax Package 1B, all Californians would pay a 6 percent income tax rate. The state’s wealthiest residents currently pay 9.3 percent with lower percentages as earnings fall.

The effect of the proposal would be to increase the taxes on Californians earning less than $100,000 to broaden the tax base.

The state’s 8.8 percent corporations tax would be eliminated, as would the 5 percent of the sales tax the state retains […]

A new “business net receipts” tax makes up for much of the lost revenue from the sales and corporation tax eliminations.

“Business net receipts” taxes are essentially a value-added tax.  And one estimate predicts that it would take in $28 billion dollars annually.  But everything must be revenue neutral, so in a time of crisis, the Parsky Commission would go to a FLAT TAX and eliminate the corporate tax rate, as well as possibly cutting the capital gains tax.  It’s impossible to see this as anything but a giant wealth transfer from the rich to the poor.  Simply impossible.

Useful idiots like the folks at Calbuzz prefer not to actually take sides on an issue when just splitting the difference between left and right automatically provides the best practice every time.  Their somewhat illuminating article about all of this betrays a bias toward that wise “sensible centrism” that ends up orienting toward crazed right-wing solutions every time.

The political play is to produce a tax reform bill so clean it can be introduced in both houses with assurances no one will be allowed to bog it down with amendments.  Democrats will be able to avoid drastic program cuts and Republicans can claim they’ve cut taxes.  The bill breezes through both houses on an up-or-down vote and bada bing it gets signed by Arnold and everybody goes to dinner.  No muss, no fuss, no partisan fingerprints […]

Getting a consensus recommendation from the commission, which includes conservatives like former Reagan economic adviser Michael Boskin and liberals like Santa Cruz County Treasurer Fred Keeley is by no means guaranteed. Even if commissioners do agree, their proposal will be fly-specked by lefty groups who will dislike elements that are not progressive, and industry groups, who will push for business-friendly changes.

As a political matter, forcing an up-or-down vote on a package in the Legislature would address what-about-me objections from all quarters, in the same way as the prohibition on amendments to congressional legislation produced by the military base closure commission in the 1990s finally solved that intractable problem. (Or like a Pete Wilson-Willie Brown deal from days of yore in Sacramento.)

After all, the impending bankruptcy of state government should be sufficient to show players at every point of the political spectrum not only that sweeping change is needed, but also that everyone will have to compromise to keep California from sinking into the 9th Circle of Hell.

This is “the midpoint between two points always works best” pop politics masquerading as serious thought, and what else would you expect from a duo who can spin a whole article out of a picture of two politicians smiling.  Somehow, “lefty groups” arguing against the literally insane idea of a flat tax has the same moral and intellectual equivalency of business groups trying to wiggle out of a way to pay their taxes.  A flat tax would very clearly shift the burden of taxation to the middle class, and practically every taxpayer would actually see their tax burden increase except the few at the top.  But because we’re in crisis, and everyone will have to “sacrifice,” surely we should ram through a right-wing fantasy, turning California into Latvia, Estonia and Lithuania, all of whom have flat tax systems.  How’s that working out for them?

Over the last decade, Eastern European countries became darlings of the far right by instituting free-market economic policies designed to break convincingly from their Communist past. The so-called Baltic Tigers-Latvia, Lithuania, and Estonia-garnered worldwide plaudits for a number of free-market reforms, led by the imposition of a flat-rate income tax, especially from the American right. “The flat tax is making a comeback,” trumpeted the conservative National Review. The three nations are “leading a global tax reform revolution,” said the right-leaning Heritage Foundation […]

Too bad for them that it hasn’t worked out. Latvia, which has a flat tax of 25 percent, and Lithuania and Estonia, which have 21 percent tax rates, are all in deep economic trouble. They all have huge government budget deficits, a sign that they took in too little in tax revenue to cover their costs, primarily state expenditures to provide a generous welfare state. Conservatives might argue that they didn’t slash welfare benefits enough, but there is no dispute that the flat tax didn’t provide the expected revenue.

This is the future that would be put into place – with a no-amendment, up-or-down vote – under the Parsky Commission.  Somehow, the elected legislature of the people cannot be trusted with tax law, but an unelected, unaccountable blue-ribbon commission should be empowered to create this radical change in law with no public input.  That’s the wise and sensible solution.  Because we can’t have all this messy “democracy” mucking up the need to protect the rich and transfer wealth downward more radically than any proposal ever seen in America.  California Budget Bites has more.

It’s important to note that this all stems from the revenue-neutral demand embedded in the proposal.  Otherwise, it could never pass because it would need a 2/3 vote.  So somehow, a flat tax, elimination of corporate income taxes and slashing of capital gains taxes get thrown into the mix, something that nobody outside the fringe far right would ever endorse.  The 2/3 rule, AGAIN, prevents a real solution.

If you wonder why I oppose a so-called “bailout” for California, it’s because in addition to everything else, that attacks the wrong problem.  We need a major restoration of democracy in the state, and instead we get “solutions” that don’t reflect the desire of the citizenry.  That’s why only a local grassroots movement to finally remove the structural barriers, not a one-time cash infusion, will work.

We had, and continue to have, an unfortunate situation where a good deal of our staff, including myself and Robert, were out of town at a crucial time for California and its budget problems.  Robert will return at the end of the month.  For myself, it’s good to be back and delving into this all again.

I have about 30 posts I want to write about the developments of the past week and a half, but I want to try and alleviate the confusion over that Washington Post article stating that the Obama Administration spurned a request for aid for the state.  Outside of Zoe Lofgren, a Congresswoman, nobody is named in this request, nor is the request defined.  It refers late in the article to one letter from Bill Lockyer to Tim Geithner that appears to reference federal loan guarantees, which is, again, not a bailout.  And the Governor has tried to rule out borrowing to deal with the cash crisis anyway.  So I question whether anyone has discussed any kind of dollar transfer from the federal government to California at all.  I think this article hangs on an extremely thin reed.

Now, I do think the government should consider offering loan guarantees, to stop the gouging of California going on from Wall Street.  But I do not think that California progressives should WANT a “bailout” in the more traditional sense.  It sounds like it would be a nice and tidy solution, and maybe the strings attached could make it easier for the state to get its business done.  But that’s very speculative, and so we have to consider who such a solution would bail out.  Clearly, it would bail out the failed Democratic legislature for refusing to lead and take a long-term view on reforming the state governmental process to allow a return to stability.  We know that, with revenues dropping like a rock, in six months the projections will fall short again.  They have for about 15 straight months.  Which means what, another bailout?  That simply isn’t a long-term, sustainable solution.  Some may say that it would keep the poor from dying, but it seems to me it would only delay such an outcome.  Heck, we know that California last issued IOUs during a budget crisis in 1992, during a MILD recession.  The structure of state finances simply means that we will lurch from crisis to crisis forever without a permanent fix.

We have solutions and we know what they are; there’s really no mystery, other than the fact that legislative Democrats refuse to dare speak their name.  A federal band-aid would delay those solutions once again, as they have been delayed for 30 years.  We simply will never fix this if we keep deferring the California dream and persuading others to mop up the mess caused by failed leadership.

More generally, a while back on Calitics (can’t find it right now) I argued for a permanent federal fiscal stabilization fund that could be tapped if deficits hit a certain percentage.  States could contribute with a federal match at 6:1 or something.  We need to permanently end the paradox of state budget cuts during an economic downturn, and it should not be a stopgap fix.  If people want the federal government to help, it should be mechanized and durable, and enhance economic recovery by kicking in when recovery is needed.

This may be a contrarian view, but I think a bailout would delay the changes desperately needed, nor would it even help the most vulnerable in society over the long-term or even the short-term.  We need to deal with the problem at hand.

Here’s an excellent Q&A, really a must read, with UC Berkeley Law Professor Jonathan Simon, an expert on parole policy.  Using the killing of four Oakland police officers by Lovelle Mixon, who was on parole at the time, Simon sets aside the myths about parole and looks at the hard facts – that this is an unbelievably broken system, particularly in California, one that really cannot fulfill the mission set out for it 100 years ago.  Parole was something of an employment agency upon its inception, supervising ex-convicts at their workplace and letting them go on with their lives.  In today’s environment of social Darwinism, ex-cons are sent back onto the streets with no money and no skills to get a job, and so they devolve into homelessness or drug abuse, making it nearly impossible for parole officers to even find parolees, let alone keep them out of trouble.  

It really can’t work – which you’ll see if you look at the category of parolees who are simply of unknown whereabouts. These parolees are described as PAL, for “parolee at large,” in official California statistics.

Statewide, 14.6 percent of all parolees were PAL in 2005; in large cities like Oakland and Los Angeles it’s probably closer to 25 percent. This sounds alarming, although authorities have little basis for knowing the status of these people. Is the parolee-at-large wandering around homeless and has he forgotten to come in for an appointment, or to take his medications if he or she is on psychiatric treatment? Or, as with Lovelle Mixon, has the person gone back to doing some very serious crimes and is he evading detection? We’re fooling ourselves if we think that this century-old method of surveilling people in the community, through periodic contacts, can work with a population as isolated and marginalized as the one upon which we now focus our penal attention.

Simon theorizes that California’s parole system works even worse than most states because we eliminated early release through parole, but maintained the strict supervision requirements that invariably send parolees back to prison:

But unlike many other states that also eliminated early release through parole, California continued to require parole supervision in the community for all released prisoners. And that, I think, is a big part of what’s broken. People are sent to California prisons for a determinate amount of time, based upon the seriousness of their crime. After they’ve served this sentence, it’s neither justified nor effective to add up to three years of parole supervision for each and every ex-offender – without making any distinction between those whose criminal record or psychological profile suggest they’ll commit a crime that will harm the community, and those who pose no such threat.

So the parole system has little real capacity to monitor and protect us from those who pose a danger of committing serious new crimes. And it exposes ex-offenders – many of whom pose little threat of committing such crimes – to the likelihood of being sent back to prison. (This is a really big problem, when you think of our prison overcrowding and our budget crisis).

Parolees are required to consent to searches of their person and property. If officers stop a car in Oakland, and somebody in that car is on parole, police have a lot of leeway to disregard normal constitutional limits on search-and-seizure authority. They can use any evidence collected in this situation against the parolee – and also, of course, can attempt to use the coercion of plea bargaining to get evidence against other people in the car.

In recent years, as many as 70 percent of those on parole in California have been sent back to prison – only a small percentage of whom have committed a new crime (14 percent in 2007); more than half were sent back for what are called “technical” parole violations. These parolees are “returned to custody” by the Board of Prison Terms, very often for conduct that would not earn them (or other California citizens) prison time in a court. Turning in a positive drug test is an example; even missing an appointment with parole staff can result in re-imprisonment.

By the way, no other state has the recidivism rate of California, and certainly no other state sends as many people back to prison for technical violations of their parole appointments.  And due to the three-strikes law as well as increased sentences over 30 years, we have more Californians in prison on life sentences – about thirty thousand – as there were TOTAL PRISONERS in 1977.  The parole board is theoretically supposed to monitor the “lifers” and let out those who served their mandatory minimums and can be reasonably seen as representing no risk to the community, but in reality we let out something like 5 per year.  Meanwhile more life sentences are given to thousands of prisoners every year, and the problem simply grows.

Even Arnold Schwarzenegger’s supposedly bold plan to release all undocumented immigrants from prison and deport them – something he hasn’t bothered to run by the Immigration and Customs Enforcement arm of the federal government – has so many strings on what type of prisoners should be allowed to go free (one felony conviction, nonviolent and nonsexual crime, etc.) that only 1,400 out of 18,000 would qualify.  

Tough on crime policies have very simply destroyed California, leaving every lawmaker looking over his or her shoulder trying to be crueler toward criminals than their opponents.  In the end, we all suffer, as scarce resources get taken up by a prison-industrial complex that is the fastest-growing sector of the state budget.  These policies have been discredited, and other states have proven that you can maintain the peace and provide for public safety while not stuffing prisons with a seemingly endless amount of criminals.  We can bring the idea of corrections, and rehabilitation, back to the corrections process, if we only shake off the fear that practically every politician exudes when promoting these terrible policies.

Late last week I received a statement from an anonymous state employee working at the Employment Development Department, which included some pretty stunning allegations about how Arnold Schwarzenegger and the Legislature are dealing with state workers.  For example, the Governor would reduce all state employee salaries by 5%, including ones not paid out of the General Fund but through other dedicated resources, including federal dollars.  Our budget deficit is a General Fund crisis, not a crisis of those other resources, and so there is absolutely no necessity to reduce those salaries.  In addition, the Governor has proposed furloughing such workers, an illegal action since state law excludes Special Fund workers from these types of job reductions.  The State Compensation Insurance Fund just successfully sued the Governor over this matter.

Perhaps worst of all, the Governor and the Legislature have in recent years used special fund money to balance the budget.  This is EXACTLY what Props. 1D and 1E would have done, moving dedicated funds into the General Fund.  And yet the Governor and a compliant legislature goes ahead and does it anyway when the funds at risk are more murky and have lower-profile champions.  This parallels the Governor, despite failing with Prop. 1A, budgeting a $4.5 billion dollar reserve for the upcoming fiscal year, despite the “rainy day” we’re currently facing, essentially moving forward in violation of the will of the voters with a spending cap.  

Democratic lawmakers are floating a plan to use that projected reserve, but resist augmenting that with new revenues, leading to $19 billion in additional cuts and borrowing from local governments, really a terrible plan considering the alternative options on fees.  The unions are getting impatient with the lack of leadership, and advocacy groups seem more interested not in working with them but just going the heck around them.  This note at the bottom of the LAT piece from Lenny Goldberg is the buried lede:

The next step for unions could be going directly to voters. One labor-backed group, the California Tax Reform Assn., has prepared a possible ballot measure to repeal the three corporate tax cuts Democrats agreed to in the last year to get GOP support for the budget.

“It’s ready to go,” said Lenny Goldberg, the group’s executive director.

Reading the statement from the state employee, which I’ve posted on the flip, gives you some of the reasons why workers feel they have no allies in Sacramento anymore.

I’m a California State Employee and I’m currently working approved overtime in the middle of a state financial crisis.  I work for the Employment Development Department (EDD).   EDD is conducting massive hiring.  In the two months alone, my office alone has hired 30 trainees and is continuing to hire.   This action is allowable because approximately 90% of EDD’s budget is paid directly with federal dollars.   The majority of the remaining balance is paid by seven other special funds.  Only one quarter of a percent derives from the General Fund.

Gov. Schwarzenegger would have Californians believe that all state employees are lumped into one sole classification. In reality, state employees work for departments that fall into one of two categories:   General Fund or Special Funds.

Special Funds Departments budgets are allocated by either self sustaining revenue funded entirely on fees or premiums and/or have been designated for a sole purpose by California Voters or funds from the federal government.  There are 51 state departments whose budgets are derived from the Special Fund.   The current State financial crisis is a General Fund crisis, NOT a Special Fund crisis.    Politicians and the media fail to emphasize the distinction.  They would have you believe that there is one state indistinguishable budget.

For example, The Department of Alcoholic Beverage Control, The Department of Community Services and Development, and The State Council on Development Disabilities and are funded entirely out of federal dollars and receive no General Fund dollars. The Department of Motor Vehicles and California Highway Patrol are funded entirely out of special funds.

I and my co-workers are at a loss to understand why the governor is proposing to reduce all state employee salaries by 5%.   His action is illogical.  Special Fund employee salaries are not paid out of the General Fund. This is wasteful management of resources and of personnel.   There is no justification for this action.  Why reduce an employee’s salary when there is no necessity to?   Why continue to hire if the state is in cash flow crisis?  Anyone can review the State Personnel Board’s web site (http://jobs.spb.ca.gov/wvpos/search_p.cfm?showAll ), and can see for themselves that the State is still hiring.  There are currently over 2000 job vacancies with the State of California.

On top of the proposed 5%, the governor implemented a two day furlough for all state employees.  The reality is that I am mandated to report to work on my furlough days to meet public need and not get paid for it. The official policy is that the furlough days are accrued and can be taken at a later date.  However, due to the high work load, requests for time off in exchange for furlough days are denied.   There is a deadline for which all furlough dates must be taken: June 2010.   Use it or lose it.   The California Attorneys, Administrative Law Judges and Hearing Officers in State Employment have filed a lawsuit on behalf of its Special Fund Employees as being unlawful.  Interested parties can read the brief at    http://www.sacbee.com/static/w…

The lawsuit cites how each department is funded and its impact on the General Fund.

My co-workers and I work overtime to recoup lost hours just to pay for my necessities of life, such as my food and my mortgage. Contrary to popular opinion, the average employee does not make six figures.  In issuing furloughs and the proposed 5% cut, the state increases its budget deficit in that it loses income tax revenue from state workers.

In recent years, the governor and the legislative branch have dipped into the Special Funds Budget to cover the General Fund deficit.  Gov. Schwarzenegger balanced last year’s budget by borrowing $574 million from various special funds.  Where does this money go? How is it repaid? No one truly knows.   Californians rejected his budget measures in the May 19 special election to shift money from special funds for mental health services and early childhood care and education.  Why is this practice still being continued?

On February 5, 2009, The Los Angeles Times reported that the U.S. Labor Department objected to EDD employees being furloughed since the salaries were primary paid with Federal dollars.   (http://articles.latimes.com/2009/feb/05/business/fi-unemploy5)  The Labor Department notified the governor that the furloughs could impact EDD’s performance in meeting criteria for the timely handling of unemployment claims and appeals.   The Labor Department notified the EDD that failing to comply could violate Social Security laws.   The governor was unmoved.

Similar to 911, this is a game of power and politics.    It is a tactic to instill fear in the general public to justify actions that would not normally be endorsed or approved.   The governor should follow the President Obama’s lead and use a scalpel rather than an ax to make precise cuts.  The governor can not have budget reform without the trust of the people and without providing the state with crucial and vital details of the nature of the budget.

Signed

Employee Proudly Serving the State of California

While Willie Brown reads tea leaves, actual votes are taking place in Sacramento.  And the budget conference committee, in the end, rejected cuts to Cal Grants and Hastings College that the Governor requested.

California took a multimillion-dollar step backward Friday in cutting its budget.

Assembly and Senate members in a budget conference committee balked at derailing the Cal Grant program of college aid or stripping Hastings College of the Law of nearly all its state funding.

By rejecting the two proposals by Gov. Arnold Schwarzenegger, however, the committee created a new $235 million headache in its bid to fix a gaping fiscal hole.

The panel is rushing to balance the state’s recession-wracked budget by curing a projected $24.3 billion shortfall.

Republicans actually claimed they were against eliminating Cal Grants but wanted to find additional offsets in the budget.  But in the end, they voted to get rid of every aid grant for 77,000 low- and middle-income California students who want to attend an institution of higher learning.  You would think that the Democrats could do something with that.

With respect to Hastings College, the budget committee averted what could have been a costly disaster.

Schwarzenegger’s Hastings proposal would have eliminated about $10.3 million in state funding for the University of California law school, leaving it with only $7,000 in general fund support and $153,000 from lottery revenue.

Sen. Mark Leno, D-San Francisco, argued Friday that the cut was much deeper than those targeting other UC programs and would raise Hastings’ annual tuition from $28,600 to about $36,600.

Leno said the cut could launch a costly court fight over terms of the law school’s creation, which called for Judge S.C. Hastings to donate $100,000 to support the campus – and for the state to pay his heirs that sum, plus interest, if the state ever abandoned its financial support.

Leno said the governor is attempting to “privatize” the law school, and if the Hastings heirs sued, the state could wind up owing more from 130 years of accumulated interest than it could save from its budget-cutting proposal.

Seriously, did anyone in the Governor’s office even think about the possibility of paying 130 YEARS’ WORTH of accumulated interest on a $100,000 contribution in order to save $10 million, and how those numbers do not compute?

I think you can see where this goes.  The conference committee is not nearly in the mood to accept the most extreme of the Governor’s proposals – I don’t think they’ll tell those AIDS activists in the streets that they can no longer get their drugs, for example.  And then we’ll have a fairly large remaining gap after the committee’s work is done.  The first pot of money the budget committee will attack will be the absurdly large $4.5 billion reserve in the Governor’s plan, essentially ignoring the will of the people not to institute a spending cap and socking away billions of dollars in the middle of a near-depression.  After that, we’re going to see a big fight.  We need to continue to leverage grassroots pressure, wedge Republicans who are  starting to waver on a cuts-only approach, and let Democrats know that they must hold the line on things like eliminating welfare and children’s health care, and incorporate a majority-vote fee increase to make up the difference.  We’re already seeing cracks in the rush to shock doctrine California.  Let’s break it open.

It’s taken the proposed destruction of practically the entire social safety net in California for progressives both inside and outside the political system to fight back.  I’m actually more heartened by the work done outside it.  I expect Lenny Goldberg to come up with a great alternative budget calling for tax fairness, and end to corporate welfare and a government for all the people instead of the rich.  I expect Jean Ross to do the same, as well as AFSCME.  They’re all good proposals, but this is what they are paid to do.  What I don’t expect, and what I haven’t seen, is a citizen’s movement to rival the institutional  and advocacy machinery.  The Fix the California Budget Facebook page is really one of the first such grassroots pushes I’ve seen in recent memory.

Californians deserve real solutions to the budget deficit. Responding to our economic crisis with an all-cuts budget will only make the state’s problems worse. Deep cuts to vital programs undermine our economic recovery and President Obama’s investment in economic stimulus, disproportionately harm the most vulnerable Californians, and go against our core values.

More than 70 percent of voters sat out the May 19 special election because it is the Governor and Legislature’s job to fix the budget. Polls show the defeat of the initiatives was neither an endorsement of an all-cuts approach nor a rejection of raising revenues.

Under Governor Schwarzenegger, we have suffered $23 billion in spending cuts in the current budget year alone. Additional drastic cuts will irrevocably change the state we love. Californians support and deserve a state that provides for the common good and the needs of our residents, and we need to pursue realistic revenue solutions that will protect our shared priorities. Cuts are not the only option!

Our state needs courageous leadership. We will support those who stand against an all-cuts budget, speak out for fair ways of raising revenue, and work to deliver a budget that invests in our future and protects all the people of our state. True leaders get their strength from the people they represent. We pledge to be that strength, and mobilize to support a sensible budget solution.

The specific action items are to call your lawmaker and provide that counter-weight to the internal pressure to support the all-cuts approach.  They reference the majority-vote fee increase as a legitimate option that must be put before the Governor in place of the worst cuts.  County Democratic Chairs and local activists are actually driving the pressure from below, rather than having solutions imposed upon them.

This represents an opportunity.  It doesn’t mean we win this fight – we’re going to lose more than we win at first.  And in a way, this is the corporate “reform” community’s worst nightmare – the Bay Area Council and California Forward would rather drive the reform process themselves and keep it within their own particular boundaries.  But we can build a movement of a newly-roused core group of activists committed to setting California on the right path by restoring democracy, eliminating the conservative veto and reforming the broken system.  This is a first step.